Newspaper article The Evening Standard (London, England)

Bloated Bankers, Fat Fees and Slimmer Pickings

Newspaper article The Evening Standard (London, England)

Bloated Bankers, Fat Fees and Slimmer Pickings

Article excerpt


INVESTMENT banking tends to excess. The nature of the beast inclines towards extreme luxury when times are good and savage cost-cutting when times are bad.

So it is hardly surprising, given current market conditions, to see think-tanks such as the Centre for Economics and Business Research forecasting 20,000 job losses in and around the City this year.

Goldman Sachs has openly said staff numbers will fall by 5%. Others have been more cagey but they are all at it, quietly managing people out, not replacing those who leave and paying off financiers who are not cutting the mustard.

Some, such as Credit Suisse First Boston and JP Morgan, are lucky.

CSFB bought DLJ last year and JP Morgan was acquired by Chase, which had just bought Flemings: they can blame their job culls on post-acquisition pruning. The rest simply have to admit their bloated cost base does not allow for much of a business downturn.

To date, there is an attempt to be more orderly about job cuts than in the past. Wholesale redundancies have been replaced by a more systematic look at who is bringing in fees and who is riding on other bankers' coattails.

Performance reviews are weeding out the bottom 10% of operators and sending them on their way. Lavish perks and expenses are also being ditched.

The banks presumably view their actions as good housekeeping. A more critical look at their behaviour might produce a less charitable conclusion.

There is a consensus that dispensing with the services of the poorest performers will have no impact on firms' underlying ability to do business.

When the deals come along, the best brains in the City will be there to make sure they are done well. This rather begs the question of why the weaker operators were there in the first place. Even less-able bankers would generally be on pay packets of at least [pound]100,000. …

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